*{Sustainable Consumption and the Free Market.
Down to Earth conference: Sustainable Consumption in the 21st Century. 22-24th Sept 1999, Southampton, UK [http://www.iccwbo.org/home/environment_and_energy/sustainability_and_the_free_market.asp]

Speech given by Dr P.R. White (on behalf of Lord Holme of Cheltenham, Chair of ICC Commission on Environment), Associate Director, Corporate Sustainable Development Dept,Procter & Gamble, Newcastle, UK. 

Introduction

Mr Chairman, Minister, Ladies and Gentlemen, thank you for this opportunity to talk to you this morning. As you know, Lord Holme is unable to be with us and sends his apologies. Lord Holme is Chairman of the Environmental Committee of the ICC, and also chairs one of the working groups within the World Business Council for Sustainable Development (WBCSD). My company, Procter & Gamble, also sits on various ICC Committees and chairs a different working group at the WBCSD - the Sustainability Through the Market group - so it is perhaps apt that we have been asked to step into the breach for this presentation.}

I have been asked to address "sustainable consumption and the free market" - ideas that are often seen to be at odds with each other. I'd like to change this around and show how sustainability can be achieved through the market, and how free and effective markets can create the best conditions for everyone to achieve a better quality of life, both today and in the future.

*partie=titre Sustainable Development *partie=nil 

But first let's look at sustainable development. What is it? 
From the first Brundtland definition of "Meeting the needs of the present without compromising the ability of future generations to meet their own needs" it was clear that sustainable development is a broad concept, and not simply an environmental issue. Sustainable development embodies economic growth, and social progress in addition to environmental protection. However, there has been a tendency to concentrate on the environmental aspects, at the expense of the other two pillars. Sustainability has become synonymous with coping with limited resources : "a world with less stuff". Similarly, sustainable consumption has often been interpreted as "making do with less". Many of the world's people already have to make do with less.

As the UNDP human development report puts it: 
"Well over a billion people are deprived of the basic consumption needs. Of the 4.4 billion people in developing countries, nearly three-fifths lack basic sanitation. Almost a third have no access to clean water. A quarter do not have adequate housing. A fifth have no access to modern health services. A fifth of children do not attend school to grade 5. About a fifth do not have enough dietary energy and protein. *{..}In developing countries only a privileged minority has motorised transport, telecommunications and modern energy".

There is an alternative, much brighter vision of sustainable development, however, that concentrates on the "meeting needs" part of the Brundtland definition. The UK government definition captures this well "Sustainable development is about ensuring a better quality of life for everyone, now and for generations to come". That's both a world with more and a world with less. A world with more opportunities, more education, more leisure time. A world with less disease, less infant malnutrition, less waste, fewer industrial injuries, less time spent worrying where the next meal is coming from. The prime emphasis should be on how can we achieve this, how can we improve quality of life for everyone? To paraphrase the Brundtland report, how do we get "more, for more, from less?"

So where does Sustainable production and consumption, and the market come in?

*partie=titre Sustainable Production and Consumption *partie=nil

It was chapter 4 of Agenda 21 signed in 1992, that started the focus on sustainable production and consumption as the two sides of the market, supply and demand, that needed to be addressed to improve sustainability. Considerable attention had already been focused on the production side. The Brundtland report in 1987 had laid out that the role of business in sustainable development was the provision of "more with less" - more value from goods and services with the consumption of less resources and the production of less emissions and wastes. This was developed into the concept of eco-efficiency by the WBCSD, and the concept of "Cleaner production" from UNEP, and is now considered a core business strategy for both economic and environmental reasons.

There have been many examples of "more from less" products. In our own industry we have seen concentrated laundry products that use 50% of the ingredients per wash compared to former products; products that wash effectively at lower temperatures so saving energy amounts equivalent to the output of power stations; in-home refill packaging that helps reduce solid waste. Eco-efficiency is now being incorporated into government policy and strategies in many countries. The OECD, for example, held a successful workshop earlier this year in Australia, aimed at promoting eco-efficiency. 

The European environment agency has further simplified the concept of eco-efficiency to delinking the "use of nature" from the economic activity needed to meet human needs - a similar idea to "dematerialisation". Indicators from the EEA show that there has been some significant progress in eco-efficiency in several areas, such as a clear increase in energy productivity across Europe over the last 15 years.

Following this progress on sustainable production, attention has moved to other stages in the lifecycle - particularly the consumption side. Critics have said that eco-efficiency is not enough. The global population continues to grow and there is concern that this is eating into any eco-efficiency improvements. There is also the so called "rebound effect" whereby increasing efficiency could lead to cheaper products and services, so that people can afford and use more. 

It is true that eco-efficiency alone is not enough - but then business has not claimed this. There do need to be changes in consumption patterns, but this does not always mean consuming less. We have seen that for a large part of the world's population, this means being able to consume more. The need is clearly to consume differently, so that everyone can enjoy a  better quality of life. What we want is consumption that leads to an ever increasing benefit to cost (or impact) ratio. 

The objective is to improve lives for all, not just "using less stuff", although clearly eco-efficiency and resource management have important roles to play. Concentrating on consumption, or for that matter production, alone takes one away from what the whole lifecycle is there for - to provide the goods or services to help improve peoples lives. Production and consumption are two sides of the same coin, and should be considered together to see how lives can be most efficiently and effectively improved.

*partie=titre The Benefits of Markets *partie=nil

There is another danger in looking separately at production and consumption - the danger of ignoring what happens in the middle. Production and consumption meet in the marketplace, and the market has many characteristics that can help people improve their livesin a sustainable way. 

Firstly, the market offers choices, so that people can decide for themselves what best improves their own lives. As part of its work programmes, the WBCSD has held a series of multi-stakeholder dialogues, one of which considered this issue. There was general consensus that "judging quality of life is a very personal thing. Individuals need to balance the needs for food, shelter, health, safety, security, education, sense of purpose and free time. Individual choice in the market needs to be safeguarded." Put simply, "a better quality of life" is best defined by the free choice and aspirations of each and every individual.

Secondly, markets provide competition. Competition in free markets plays a vital role in driving business towards the resource efficient provision of goods and services. More than this, competition in the market encourages experimentation and innovation, rewarding those ideas that best meet people's needs. We need experimentation since none of us has a crystal ball to tell us which solutions will contribute most to long term sustainability.

Innovation is vital for sustainable development. Technological innovation can help us replace, or even leapfrog over existing infrastructures to help improve lives. Many parts of the world, for example, have been able to avoid the need to implement copper wire based communications systems, and have gone straight to mobile cellnet systems. Are there opportunities for us to do similar things for water, waste and other infrastructure systems? 

We need innovation to keep up the battle against disease, to find ways to treat pathogens that are becoming immune to our existing drugs. We need innovation to address the everyday frustrations of life.

We need technological innovation to provide the products that will improve lives in a resource efficient way in the future, but equally we need social and economic innovation in the way that we live and work together in society. We already see many such trends - for example the provision of services instead of the sale of products. Competition in free markets stimulates both technological and social innovation.

Because of these benefits we look to free and effective markets to help promote sustainability - to reach "sustainability through the market".

*partie=titre Making Markets Work *partie=nil

There are some aspects of markets that should be addressed, however. While markets should be open and free, they should not be unfettered. Totally unfettered markets , operating without rules, can fail to recognise important quality of life issues. The rule of law and sound property rights are essential components in any market. Furthermore, markets operate best within a set of framework conditions, which determine what behaviour is acceptable, and how the market should operate. These are defined by governments on behalf of society. 

Effective markets need to provide price signals that promote resource efficiency. However, many markets have subsidies or perverse incentives that work in the opposite direction.

Markets also require information if they are to function. Information, together with raised awareness and education of consumers will allow them to make more informed choices as to how they best improve their lives, and the wider implications of their choices. 

Many companies are looking at ways to improve the provision of information in the marketplace. There is a dilemma over providing information, however. Some people want simple information to help them make informed choices. Others need greater detail about both the products and the company producing them. Satisfying both without appearing either patronising or being incomprehensible is a difficult task. The Internet is one of the tools that many are turning to, since it allows a layered approach to the provision of information. 

*partie=titre Shared responsibility *partie=nil

Business has an important role to play in sustainable development, but business cannot do it alone. We live in a tri-polar society - made up from governments, business and civil society. All have rights, roles and responsibilities in making progress towards sustainability. 

In the tri-polar world, business does have a unique role in that it is the only generator of wealth. Governments help re-distribute it, but it is business that creates the wealth, which flows back into the economy through wages, purchases and taxes, both local and national. Through the development of the global market, there has been a significant rise in wealth creation over the last decade, both in terms of total GDP, and also in per capita GDP. This has provided people around the world with the economic development to allow them to improve their lives. Liberalisation of trade, in turn, has lead to greater foreign direct investment in developing countries, so that it now outstrips the overseas development aid of governments to such countries. This investment in infrastructure and people contributes to the social progress and economic development aspects of sustainable development. 

Along with roles come rights and responsibilities. Another WBCSD stakeholder dialogue session attempted to define what these 3Rs should be. They agreed that:

Business has a responsibility to innovate, to market safe and sustainable products and services that meet people's needs, to adopt high ethical standards in how it operates, and to provide information so that people can make appropriate choices.

Turning to the second element of the tri-polar society. The public, as individual consumers and citizens, are responsible for using the information available in the market to make choices on how best to improve their quality of life sustainably. They also have the responsibility for taking advantage of the opportunities created by business and governments. 

Governments have responsibility for working with all elements in society to identify what the key priorities are, and for setting the market framework conditions that promote environmental, economic and social sustainability. In this they need to create the "level playing field" on which full and fair competition can operate.

Governments have a range of tools available to them to set market framework conditions to promote improvements. Regulations are needed to outlaw unsafe or unacceptable behaviour, but it is not generally possible to legislate for continuous improvement. More sustainable operations and outcomes can be promoted through the use of voluntary initiatives by business. One such example would be the AISE Code of Good Environmental Practice for detergent production and use. 

There is also a role for negotiated agreements between business and governments. Economic instruments can have a role to play if they are carefully designed so that they avoid perverse consequences. The key is for governments to set the priorities and the desired result, and to allow the market to find the most effective way to get there.

Finally, Governments, business and citizens organisations are all responsible for raising public awareness about the relationship between sustainability and quality of life, and to do more to inform their choices in an open and balanced way.

Just as no one part of society can achieve sustainability alone, so we need to look at new ways that the parts of society can work together to achieve sustainability through the market. There are a range of examples - business co-operating with business along the supply chain; business-government co-operations, and also business-NGO cooperations such as the recent establishment of the Marine Stewardship Council.

*{Conclusion}

In conclusion, there currently seems to be no viable alternative to the market economy. The way forward is to promote sustainability through the market - to use the positive aspects of markets -, choice, competition, and innovation, to give people the opportunity to improve their quality of life. At the same time recognising that some aspects need enhancing - the  provision of information, education and awareness raising and the development of effective market framework conditions. 

Sustainability will be enhanced by a range of policy approaches:
an open market for goods and services, governed by the rule of law; 
an environment conducive to innovation, both technological and social; 
informed decision making based on sound data; 
individual choice - people should be free to choose what best improves their own quality of life; 
clear priorities for future improvements. 

As we approach the 21st century this will be a challenge. Particularly in light of three major dilemmas we now face:
The communication revolution which: on the one hand brings the plight of people in under-developed economies vividly to the attention of people in developed economies; on the other hand provides images of a developed economy life-style to those in developing economies. Thus the tensions between rich and poor are fuelled.  
The information revolution which: on the one hand enables us to consider many more decision-making opportunities and consequences; on the other hand makes it more difficult to analyse and use the available information. We must avoid "paralysis by analysis". 
The involvement revolution which: on the one hand strengthens the democratic and decision-making processes because more people are prepared to be involved; on the other hand demands the creation of new and effective methods of participation. Thus decision making becomes more challenging. 

We need to work on both the challenges and opportunities that these dilemmas bring. Despite this, sustainability through the market is the best strategy to take. Sustainability through the market - since markets encourage innovation and create the best conditions for everyone to achieve a better quality of life, both today and in the future. 

*{Commission on Environment}